Electric car tax: Everything you need to know

What is the Expensive Car Supplement for EVs?

The Expensive Car Supplement, often called the 'luxury car tax', is a fee added to your Vehicle Excise Duty (VED or road tax).

For zero-emission cars, the threshold is now £50,000. This is up from £40,000 for petrol and diesel cars.

For used car buyers, this means you must pay the supplement every year until the car is six years old, even if you bought it for much less than £40,000.

It's also crucial to remember that the £50,000 limit is based on the list price when the car was brand new. This includes any factory-fitted optional extras but doesn't take into account dealer discounts or incentives.

How does the 2028 pay-per-mile tax work?

The Electric Vehicle Excise Duty (eVED) is a new, distance-based road tax for electric and plug-in hybrid vehicles scheduled to come into effect in April 2028.

It's designed to replace declining fuel duty revenues as more drivers transition to electric cars. The current rates are as follows:

• Fully Electric Vehicles (EVs): 3p per mile
• Plug-in Hybrid Electric Vehicles (PHEVs): 1.5p per mile

These rates are designed to offset the loss of fuel duty as more people switch to electric.

How do tax changes affect my EV insurance?

Whilst tax has gone up, insurance premiums for EVs are also currently 25-40% higher than their petrol equivalents due to their repair complexities.

Because running costs are changing, it's a good idea to compare car insurance quotes annually to ensure you're not overpaying.

What other costs are there for EV owners?

The new tax isn't the only cost EV owners have to think about:

• Upfront cost: EVs are expensive to buy. This is one of the major barriers for most people when thinking about splashing out on an EV. But it's unlikely they'll always be so pricy as the market slowly shifts to more affordable models
• Home charger installation: If you don't already have a electric car charger installed at home, this will be an additional cost. Installation typically costs around £1,000. You could be eligible for a government grant of up to £500 towards the cost of installing a chargepoint at your home. Renters, flat owners, and landlords may also be eligible, but it's good to check the government's Office for Zero Emission Vehicles (OZEV) for the full eligiblity criteria.
• Charging: It's cheaper to charge a car at home than pay for petrol. You may want to compare EV tariffs to make sure you get yourself the best deal. It's worth remembering that charging an EV at home means you'll be using more electricity, which could mean your energy bills increase.
• Electric vehicle insurance: As it stands, a brand new EV is pricier to insure than a new petrol or diesel car. This could be because sourcing and replacing the parts are more expensive
• Maintenance: Luckily EVs don't tend to require as much maintenance as their petrol and diesel counterparts. But you'll still need to get the tyres and brake pads checked, and potentially get a fluid replacement. It's always worth checking with your local garage to get an idea of how much you'll pay for EV repairs.